New technology and growing global trade have changed the U.S.
economys mix of jobs and industries. Computers have revolutionized work
and workplaces and raised the skill requirements for many jobs. Employers
need for greater workforce flexibility, coupled with efforts to hold down
benefit costs, will increase demand for nontraditional workers. This chapter
examines the effects of these changes on American workers.

EMPLOYERS ARE DEMANDING HIGHER SKILLS

Demand for higher-skilled employees is a 50-year trend that has become
increasingly important. Where strength and manual dexterity used to be enough
to ensure employment and a comfortable standard of living, more jobs now and in
the future will require verbal and mathematical, as well as organizational and
interpersonal, skills. Emerging technologies, globalization, and the
information revolution are also increasing demand for high-tech skills. Workers
welcome the increasing number of new job opportunities available in a broad
spectrum of industries. The want ads, clamoring for workers in the information
technology, communications, and service industries, reflect both the increased
opportunities for workers and the increased need for up-to-date skills.
American workers and businesses are responding by investing in more education
and training.

In the midst of the creation of these new high-tech jobs, most current jobs
will endure, albeit in altered form. Skills will need updating as technology
introduces new ways of completing age-old tasks. For example, many classroom
teachers will continue to stand before their students, while some will appear
by video or satellite hook-up and answer student questions at night via e-mail.
Editors will still work their magic on the written word, but many will do so
from their homes or anywhere a modem is available. The fundamental skills used
by these workers will endure but they will also need new skills to function
effectively. There are few working Americans who will not face the need for
supplementary skills to remain competitive in their existing jobs.

Skill requirements have increased for many jobs in the U.S. economy, but a
closer examination reveals a more complex relationship between technology and
job content. Consider the change in machine shops from manually-operated
machine tools, such as lathes and drilling machines, to computer-programmed
machine tools. Manual operation required skill in reading gauges and other
measurement devices, as well as manual dexterity acquired through relatively
long periods of training and doing. Contrast this with the requirements for
users of newer, computer-programmed machine tools. Newer machine tools require
much less manual dexterity, but they demand computer literacy and perhaps some
programminga very different skills package.

The machine-tool operator today is more likely to insert a programmed
diskette into a control module than to set measurement devices manually. The
computer program itself is likely to have been written by a programmer, not by
a machine-tool operator on the shop floor. Though it might appear that
machine-shop workers skill requirements have decreased, some workers may
exercise discretion over the programmed tool. In fact, some jobs in the machine
shop have been "de-skilled" while others have been redesigned to
require formal education in new, abstract skills such as use of programming
languages.

The Bureau of Labor Statistics (BLS) periodically projects the types of jobs
that will be needed in the U.S. workforce. Table 7.1 shows the latest BLS
projections of the occupations in the U.S. labor force to the year 2006.

The occupational groups that require the most education are projected to be
among the fastest-growing. Employment in professional specialty occupations is
projected to increase the fastest. Technicians and related support occupations
will have the second fastest growth rate.

To meet rising skill needs, young workers are raising their skills, not only
by obtaining more schooling, but also by participating in post-school training
to a somewhat greater extent than did previous generations. Between 1983 and
1991, the number of 20-to-24-year-olds participating in formal job training
programs increased from 8 percent to 10 percent. 1 Younger workers also participated in post-school adult
education and training activities at higher rates than their older
counterparts. More than half of all 17-to-27-year-olds had participated in
post-school adult education and training activities since leaving full-time
schooling. In contrast, only 40 percent of workers over 60 years old had ever
participated in adult education and training.2

Much of the investment in post-school adult education is being made by
workers who already have higher levels of formal educational attainment. From
1990 to 1991, nearly 80 percent of young workers with some college education
had participated in post-school education and training since leaving full-time
schooling. Fewer than half of young workers with a high-school degree but no
college, and only 22 percent of young workers with no high-school degree, had
participated in post-school training.

Large discrepancies also exist among young workers in terms of specific
types of employment-related training. The group with some college study
participated in supervisory, professional development, or sales and marketing
training at about twice the rate of those with only a high-school education.
The very low participation rates in computer software training among young
high-school-only workers (6 percent) and among high-school dropouts (under 2
percent) is particularly disturbing given the evidence that using a computer on
the job significantly raises earnings.3

Basic skills are not so basic anymore

Although the workforces educational attainment is at an all-time high,
and younger workers are increasing their amount of post-school education and
training, more is needed, especially in job-related basic skills. Consistent
with the finding that approximately 20 percent of the population reads at or
below the fifth-grade level, a 1996 American Management Association (AMA)
survey of mid-sized and larger businesses found that 19 percent of job
applicants taking employer-administered tests lacked the math and reading
skills necessary in the jobs for which they were applying. The AMAs 1998
survey, however, found that this percentage had increased to almost 36 percent.

My interest is in the future
because I am going to spend the rest of my life there.

Charles Franklin KetteringInventor.

The sharp increase in the deficiency rate is due, the 1998 AMA report
concluded, not to a dumbing down of the incoming
workforce but to the higher literacy and math skills required in todays
workplace. When labor markets are tight, employers may find it necessary to
test a greater number of applicants to find qualified workers. The 1998 study
found that although the overall percent of low-education workers increased,
companies faced with continuing skills shortages were more willing to hire
skills-deficient applicants and train them through remedial programs. 4

WORK REFORMS CAN INCREASE PRODUCTIVITY . . . AND RESHAPE
WORKPLACES

Along with efforts to improve productivity through increased worker skills,
many employers are trying to improve productivity by reforming the way they
organize work and motivate workers. Work reform movements typically proceed in
cycles of enthusiasm followed by disillusionment,5 but, after trial and error, the best elements usually become part
of the accepted way of doing business. Successful reforms will shape the
workplaces of the future.

To increase quality and lower costs, some firms are experimenting with
greater worker involvement and interaction, through innovative work practices
such as worker teams, total quality management, quality circles, peer review of
employee performance, worker involvement in purchase decisions, and job
rotation. 6 Labor unions often work with
employers to put such concepts into practice in the workplace.

Additional practices used to boost productivity include profit sharing,
linking pay to performance, decentralizing responsibility, and increasing
worker autonomy.7 Changes in workplace
and factory layouts may also increase efficiency and reduce ergonomic-related
injuries. Such work practices can often result in high performance particularly
when combined with increased training, new technology, improved communications
among producers, suppliers, customers, and company divisions, or new tools for
inventory and quality control. Organizations that integrate several of these
approaches have been called "high performance" work organizations.
8 Many workplaces, including many where
workers are represented by a union, have adopted one or more of these work
practices. The Wisconsin Regional Training Partnership, for example, is an
organization in which labor and management cooperate, both within and across
firms, to build high-performance workplaces where continuous education and
innovation are the norm.

Companies now use computers and telecommunications tools to link to
customers and suppliers. Sometimes, because of these new tools, companies faced
with rapidly changing market conditions rely upon the increased involvement of
workers and their unions in managing the production process. Workers and their
unions, often through use of teams, can help management to anticipate problems
and bottlenecks, participate in new product development, monitor quality,
address safety and health issues, and so on.

Increasing the employee stake in company performance

Many firms are experimenting with linking worker pay and company performance
more directly through profit sharing. 9
Gain sharing is another type of compensation system in which pay corresponds
more directly to worker performance. 10
Some companies allow workers to buy company stock through payroll deductions at
rates discounted from the market share price. These practices increase the
economic stake that workers have in company performance. Now limited to a small
percentage of the workforce, these direct linkages of employees to the success
of their companies, if they pay off in company productivity, are likely to
spread.

In 1993, BLS gathered data on the organization of work and employer-provided
training. 11 The survey covered eight
alternative work organization practices: worker teams, total quality
management, quality circles, peer review of employee performance, worker
involvement in purchase decisions, job rotation, just-in-time inventories, and
compensation systems based on a "pay for knowledge" system. The
survey found that 42 percent of workplaces used at least one of these
practices. In 1994, the Commission on the Future of WorkerManagement
Relations found that over 95 percent of the largest employers used
employee-involvement mechanisms.

Using these new performance-enhancing strategies goes hand in hand with
training workers and enhancing their skills. The BLS survey showed that nearly
all (98 percent) of the establishments that used these new practices also
provided formal training opportunities for their workers. In contrast, only 80
percent of establishments that did not adopt any of the newer workplace
practices provided formal training. The difference in the intensity of training
(measured by the number of hours per worker) was even more dramatic. Workers in
establishments providing both training and new workplace practices spent four
times as many hours in training than did workers in establishments providing
none of these newer workplace practices. 12

The effectiveness of alternative work organizations depends on appropriate
human resource management. One recent analysis maintained that innovative work
practices can improve the economic performance of a company only if three
requirements are met:

The employees possess knowledge and skills that managers lack;

The employees are motivated to apply these skills and knowledge; and

The organization is structured to channel these skills and knowledge
towards improving productivity.13

Many experiments in work organization have resulted in dramatic changes in
the way companies operate. Not all will prove superior to previous approaches,
but those that do improve productivity are more likely to be found in the
workplaces of the future.

3 The data on participation in
post-school education and training are from Hight. For evidence on the use of
computers, see Alan B. Krueger, How Computers Have Changed the Wage
Structure: Evidence from Microdata, 1984-89, Quarterly Journal of
Economics, February 1993, pp. 79-88.

11 Bureau of Labor Statistics,
the Survey of Employer-Provided Training.

12 Robert W. Bednarzik, The
Flexible Enterprise: An Overview of the United States, paper prepared for OECD
project on Technological and Organizational Change and Labor Demand, U.S.
Department of Labor, Washington, D.C., 1996.